Tags:

For decades, this nation, lost in the turmoil of the Middle East, has suffered from the chronic illness of its economy and its outdated institutions.

Last Friday in Paris, the international community gathered to study the case, and once again administer a sizable dose of fresh cash to promote reforms and sustain its faltering economy.

Fifty countries and several international institutions (including the IMF and the World Bank) as well as multinational consulting firms were present at the "CEDRE" conference, named after the Lebanon's symbolic cedar trees. France - Lebanon's eternal friend - played host to the guests at its foreign ministry.

Unavoidable debt and banking fragility

Today Lebanon's public debt amounts to some 150 percent of its GDP, the highest rate in the world after Japan (a country which can afford it) and Greece - only just emerging from a crisis which bled it dry.

The bulk of that sovereign debt, estimated at $80 billion, is carried by the Lebanese banking system, luckily very robust thanks to customers' deposits (three times the GDP), the banks being the one sound pillar of an economy which has been listless since the start of the Syrian war in 2011.

But there is a price to pay for this solution: The vicious cycle in which the government is trapped means it must continually borrow more to pay the interests. According to experts, debt servicing amounted to a third of the state budget in 2017.

Like an old car engine, the economy is running on a closed circuit. But accidents happen, and the country nearly paid a heavy price when Prime Minister Saad Hariri was practically taken prisoner a few months ago in Saudi Arabia (to which his company is heavily indebted).

This led to an unprecedented political crisis and a run on the Lebanese pound: Interest rates on deposits doubled in view of the financial risks, depositors having understandably obeyed a survival reflex before France rushed in to "save soldier Hariri" from the clutches of his jailers.

This was made possible by a personal intervention of President Emmanuel Macron who quickly and successfully came to Hariri's rescue. For this, he received the support of Washington, in spite of the alliance between Donald Trump and Mohammed bin Salman - crown prince and new strongman of Saudi Arabia, determined to have it out with Iran - and who was punishing Hariri for his coalition government with Hizballah, Tehran's Shia ally and the Saudis' sworn enemy.

The crisis was soon over and Lebanon, which has seen worse, weathered the shock.

So once again this country, ever teetering on the brink, is still miraculously standing, thanks to the goodwill of its Arab and international "friends" whose spoiled darling it appears to be.

And yet the recent Saudi experience (when the Arab countries of the Gulf provided rather uncertain support) probably showed Lebanese leaders that they could not count on their "friends" or patrons indefinitely; that their goodwill could quickly turn to jealousy or score-settling.

Infrastructure for rubbish collection and waste treatment does not function as it should [AFP]

And it was this that led France, the European Union and the IMF (which has rung the alarm bell) to give Lebanon the following advice: The country must make serious efforts to become self-sufficient. But can it succeed in doing so?

Initiatives with no guarantees

Saad Hariri has said he wants to obtain $6 billion from international donors in order to finance public infrastructure projects, a sum meant to be part of the first phase of a Capital Investment Program covering the period 2018-2022, and amounting to a grand total of $10 billion.

These projects deal with electricity, water management and transportation. "Of the 10 billion dollars, between 3 and 4 billion will be spent on public-private partnerships (PPP)," he declared in a recent press conference in Beirut.

In short, it's a system blending feudalism with some aspects of modernity

For the Lebanese decision makers, the total duration of this investment programme, which aims to modernise the country's infrastructure, will be 12 years, for a total of $23 billion. The CEDRE participants will concern themselves only with the first phase of the funding plan. In theory, the reforms, modernisation and expenses will be monitored in real time to make sure everything goes to plan.

But these dazzling figures are quite beyond the average Lebanese citizen, who no longer expects anything from their leaders and a generally corrupt political class, which expects them to put up with the sorry state of public service, garbage collection, and waste treatment, not to mention the daily power cuts, up to three hours in the capital and far more in the underprivileged regions of the country.

"We've organized this conference to help Lebanon, but as far as any results are concerned, we just have to wait and see," a rather skeptical senior French official told Orient XXI. He also has doubts as to the country's real intentions for reform, a word in the mouth of every Lebanese citizen, from civil society activists to the president of the republic.

"To reform Lebanon, you have to begin with people's mindset, and unfortunately that is where the political class and the senior civil servants are not forthcoming," or so appears to say civil society, and even certain politicians who have no compunction about incriminating themselves.

At fault is a mixture of greed, innate selfishness, political-religious alliances, vested interests, unearned incomes, lack of civic-mindedness, etc. In short, it's a system blending feudalism with some aspects of modernity.

"Ministries or administrations, divided up between different individuals, only fill their own pockets. For example, the funds provided by the UN for Syrian refugees in Lebanon (25 percent of the country's population)... People in charge of these at the ministry of education have been accused of misappropriation, but the system is well oiled, or else nobody dares speak up." The UNICEF official who brings this accusation prefers to remain anonymous.

Energy - an economic black hole

The issue of electricity is a good example of an issue Lebanon has failed to resolve, despite all the money thrown at it over the years. The grid is in such a state of disrepair and is afflicted with such a colossal debt that it constitutes one of the Lebanese economy's greatest handicaps.

Despite the plummeting crude oil prices, the transfers of state resources to the public company Electricite du Liban (EDL) still represented in 2015 the country's third largest budgetary expenditure (8.4 percent of the total, $1.14 billion) after the debt servicing (34.6 percent) and civil servants' wages (34.7 percent).

The issue of electricity is a good example of an issue Lebanon has failed to resolve, despite all the money thrown at it over the years

It is worth remembering that until the civil war (1975-1990), EDL was able to export a surplus of energy to neighbouring Syria. Over the last few years, plans to modernise and privatise the sector have been tabled with an eye to saving money for the public purse, laws have even been passed, but have not so much as begun to be implemented.

For the critics of privatisation the risk is that the inefficiency, opacity and corruption of the public sector will simply be replaced by the similar defects of the private sector

In June 2010, the Energy Minister launched a "comprehensive energy plan" which promised electricity around the clock by 2014–2015, based on a total investment of $4.87 billion, including some private financing. The goal was to raise the total production capacity to 4,000 megawatts (MW) by 2014 and 5,000 after 2015.

Seven years after this plan was adopted, power production is still lower than 2000 MW, and rationing is still in effect. As a result, the Lebanese people continue to rely on rented generators, as in civil war days or in present day Syria.

And yet Lebanon benefits from an exceptional annual solar access. Cesar Abi Khalil, the present energy minister, blames the failure of his predecessor's plan on "obstacles" and "shortcomings" which prevented its full application.

Make of that what you will.

Already in 2002, a law was passed providing for the privatisation of electricity at the initiative of the Hariri government following the Paris II conference, at which donors' pledges of financing for Lebanon were conditioned on "structural reforms". These, however, were never carried out.

In Lebanon, people tend to say that major reforms are primarily political. Truer words were never spoken! And this is especially the case when politics is a constant source of discord and rivalry between individuals, parties and factions in a country where 17 different religious communities are represented in parliament with each demanding a slice of the cake.

A glimmer of hope?

In this context, two important developments may well have occurred in the nick of time to raise a glimmer of hope for this conference: The last minute adoption by parliament of a tighter budget than expected just one week before the opening of the Paris conference, and the scheduling of a general election in May.

The Lebanese people continue to rely on rented generators, as in civil war days or in present day Syria

But why should these seemingly standard events for most other countries, be anything out of the ordinary?

This was only the second budget voted since 2005. The country has functioned for 12 years without a finance law, owing to internal divisions and the paralysis of political institutions.

And the general election will result in a new parliament for the first time since 2009! Better late than never, we might say.

On 29 March, Lebanon voted in a budget that was $4.8 billion in deficit, whereas the first version was based on a deficit of $6.7 billion. Nevertheless, the country is overwhelmed by budget deficits, current accounts and its trade balance.

Delayed for several reasons, the adoption of this budget as well as the passing of other laws related to private investment has been accelerated as part of the same overall economic project meant to put public finances back in order and lay the groundwork for infrastructural investments amounting to $23 billion over a period of 12 years.

But will the coming election have the beneficial consequences which everyone is hoping for?

There will be all-female lists of candidates, civil society is doing its best to bring out the voters, and the campaign is in full swing.

But pessimists wonder about the role of money. The French language business monthly "Le Commerce du Levant" titles its April editorial: "The Triumph of Money", "Already, during the 2009 election, there was talk of a total of at least one billion dollars spent," it states.

But there was nothing far-fetched about this figure. If we are to believe Ammar Abboud of the Lebanese Association for Democratic Elections (ADE), it was based on the difference between capital movements observed by the Central Bank before and during the election.

"Today, while we do not know exactly how much money is involved, sums equivalent to 2009 could theoretically be injected into the country according to LTA (Lebanese Transparency Association), even respecting the limits of electoral spending as defined by the new electoral law of June 2017, which allows each candidate and his/her list to spend up to $15 million, in keeping with the number of registered voters in his/her district and the number of candidates on their list."

Some IMF experts consider CEDRE to be nothing more than a "marketing operation", and that the "cancer" that undermines Lebanon lies in the lack of governance, and corruption.

Instead of begging for money, they believe, Lebanon would be better advised to implement the reform programmes, which have have stalled, and which could bring $6 billion into the state coffers.

A former journalist with AFP, Mamarbachi was head of section in Beirut and Rabat, as well as the economic and political service at the agency.

This is an edited translation of an article originally published by our partners at Orient XXI.

Opinions expressed in this article remain those of the author and do not necessarily represent those of The New Arab, its editorial board or staff.

We use cookies and other technologies to customize your experience, perform analytics and other customized activities. By clicking “Submit”, you consent to the use by us and our third-party partners of cookies and data gathered from your use of our platforms. See our Privacy policy.

X

Sign up to get this in your inbox every week

Tick here to also receive our weekly highlights newsletter!

We use cookies and other technologies to customize your experience, perform analytics and other customized activities. By clicking “Submit”, you consent to the use by us and our third-party partners of cookies and data gathered from your use of our platforms. See our Privacy policy.

X

Want to keep up to date with

the latest news from the Middle East?

Subscribe to our newsletter today!

Iraq Report

Egypt Report

We use cookies and other technologies to customize your experience, perform analytics and other customized activities. By clicking “Submit”, you consent to the use by us and our third-party partners of cookies and data gathered from your use of our platforms. See our Privacy policy.

We use our own cookies and third-party cookies to measure traffic to our website and analyse browsers' behaviour, with a view to improving the services we offerIf you continue browsing, we consider that you accept the use of cookies. View our privacy policy

We use our own cookies and third-party cookies to measure traffic to our website and analyse browsers' behaviour, with a view to improving the services we offerIf you continue browsing, we consider that you accept the use of cookies. View our privacy policy